Introduction
In the latest news, besides the "war between Iran and the US/Israel," are you paying attention to keywords such as "tariffs," "export restrictions," and "geopolitical risk avoidance"? Following the major wars in two global regions, discussions on economic security have rapidly intensified worldwide, and the business environment for companies is changing dramatically.
Since the start of the second Trump administration, the United States has imposed tariffs not only on trade but also as a matter of security policy. The measures taken against China, in particular, can be seen as a struggle for strategic influence. However, the risks are not limited to China alone.
This article provides a clear explanation of the realities of economic security ahead of President Trump's visit to China. Based on specific measures and case studies, it offers valuable insights for business leaders and general readers on how Japanese companies should respond going forward.
1. What is "economic security"? Why is it an urgent issue now?
The idea that "the economy is part of national security" is commonplace in Europe and the United States, but it is still not well understood in Japan.Economic securityWhile this might sound like technical jargon, it actually refers to "strengthening the coordination between national security and industrial policy."
The Trump administration has shifted the World Trade Organization's (WTO) framework of "separation of trade and security." It is using tariffs as a weapon to pressure Western companies to reduce investment from China.
Key fact: The economy and security are closely linked.
- Tariffs are a security tool: They function not merely as trade policy, but as strategic deterrence.
- Expanded export restrictions: Targeting consumer technologies such as AI, semiconductors, and critical minerals.
- Impact on businesses: An era where supply chain restructuring is essential.
Thus, economic activity is deeply intertwined with national security. Technologies that are essential to our daily lives, such as smartphones, artificial intelligence (AI), and semiconductors, are all part of the arena of great power competition.
2. Specific risk diversification strategies that Japanese companies should adopt
So, what should business leaders do going forward? They need to build their strategies around the following three points.
Point 1: Build an investment portfolio that considers both the US and China.
Relying on only one market is dangerous. Excessive investment in either the US or China should be avoided. For example:
- Operating in multiple countries
- Diversified investment in regions with low geopolitical risk
- Balanced equity and bond asset allocation
Point 2: Rebuild a resilient supply chain
A supply chain encompasses the entire process from raw materials to manufacturing and sales. Over-reliance on a single country makes a company more susceptible to export restrictions and tariffs.
in particular:
- Procurement from multiple suppliers
- Increase in the proportion of parts produced within the country
- Securing strategic stockpiles
Point 3: Avoid countries with high political risk.
It's important to pay attention not only to China, but also to countries that the U.S. is likely to impose economic sanctions on. The cases of India and Brazil are important.
The case of India:
India was subjected to a high tariff of 501 TP3T for purchasing Russian crude oil. Indian companies that partner with the US bases of Japanese companies may also be affected. However, this conflict is increasing India's global presence.
The case of Brazil:
Following the criminal indictment of former President Bolsonaro, high tariffs on 50% have also been imposed. Risk analysis incorporating political considerations is required. However, developed countries highly value the potential of Japan as the world's largest producer of biofuels and a major agricultural nation, and are closely watching developments.
3. Supplementary Information: The Future of Great Power Competition and Japan's Position
China's response
The Xi Jinping administration is retaliating with tariffs and strengthening export restrictions on rare earth elements and other materials. This is a means of retaliation against the United States and Western countries. However, this solution is being pursued on a global level.
WTO reform efforts
At the BRICS summit in September 2025, resistance to protectionism was called for. WTO reforms that would contribute to the growth of developing countries are also underway. By the time this war ends, the global landscape will have changed dramatically.
New US measures
At the recent US-UK ministerial talks, a framework was agreed upon to transfer ownership of US businesses to the US side. This kind of change happens frequently.
Specialized points to note:
Non-tariff measures are also being utilized, such as investigations into U.S. companies under antitrust laws and delays in merger approvals. These measures are implemented at opportune times, so a flexible response is necessary.
Future prospects
The Trump administration plans to secure its national interests through a series of short-term deals and then engage in negotiations with China. To counter this, business leaders need to adapt to great power competition with a 10-year perspective. A "do nothing" attitude is dangerous.
Summary
The term "economic security" isn't commonly used in the West, but it's actually considered a part of national security. All technologies that affect our daily lives are part of a major power competition.
Since the second Trump administration, tariffs and export restrictions have functioned not merely as economic policies, but as tools to achieve national security objectives. The tariff measures against China can also be seen as a struggle for strategic influence.
How should Japanese companies proceed going forward?
First, build an investment portfolio that takes a "double-check" approach, considering both the US and China. Relying on only one market is risky. Operate your business in multiple countries and consider diversifying your investments into regions with low geopolitical risk.
Secondly, you need to rebuild a resilient supply chain. Over-reliance on a single country makes you vulnerable to export restrictions and tariffs. Source from multiple suppliers and consider securing strategic reserves.
Thirdly, pay attention to countries with high political risk. This includes not only China, but also countries like India and Brazil, where the U.S. is likely to impose economic sanctions.
In today's business environment, "doing nothing" is no longer an option. A proactive approach to adapting to great power competition with a 10-year perspective is required. Understanding economic security and implementing risk diversification strategies are essential for the sustainable growth of businesses.
